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Many consumers in the Americas, particularly millennials (those born between 1977 and 1992) consider usage-based insurance (UBI) an appealing product. UBI uses telematics technology to collect data about a policy-holder’s driving habits to help improve driving through feedback and to potentially reduce premiums by encouraging safer driving. The growing numbers of tech-savvy millennials make them the perfect demographic to influence new innovations in both the insurance and auto industries.

Willis Towers Watson’s 2015 UBI consumer research in Canada, the U.S. and Brazil confirmed that millennials are particularly enthusiastic about using this evolving technology to share information with their insurers.

Millennials’ adept use of smartphones and openness to new ride-sharing services such as Uber help explain why they find UBI especially appealing. They’re not only open to buying UBI but actually prefer it to traditional ways of calculating their auto insurance premiums (see Figure 1, below).

But millennials’ interest in UBI goes beyond a simple interest in the technology. They’re more willing to drive safely in exchange for a discount, and they’re highly interested in value-added services enabled by technology (see Figure 2, below).

Among the services most attractive to respondents considering a UBI policy, theft-alert tracking ranked the highest, with 94% in Brazil, 87% in the U.S. and 86% in Canada. In all three countries, the spread among the most attractive services was narrow, particularly in Brazil, where automated emergency calling in the event of a crash, breakdown notification, and vehicle wellness all placed second, with 91% (see Figure 3, below).

Consumer Preferences

When asked which technologies they found most acceptable, respondents in all three countries preferred a small, easy-to-fit plug-in device, and the difference between millennials and the other age groups wasn’t large. Smartphone apps were also popular, particularly if they were apps respondents already had—91% in Brazil, 87% in the U.S. and 86% in Canada. With the exception of Brazil, where respondents were slightly less likely to download a smartphone app, consumer interest in either a smartphone app or a plug-in device was roughly the same (84% versus 87%).

Generally in the U.S., and particularly in Canada, millennials were more likely to be open to all UBI technologies. For Canadian millennials, this was apparent when they were asked their opinion on UBI apps: millennials taking a policy said they’d be willing to use an existing app (86%) or download a UBI app (84%), compared with all other age groups (64% and 63%, respectively).

Although respondents embrace UBI app technology, they’re willing to use it within certain limits. In general, they want convenient apps that provide accurate recordings. In fact, many consumers would like a feature that not only records a trip but also requires the user to confirm the recording’s accuracy at the end of the journey. Less acceptable is an app that taxes monthly data use or drains a phone’s battery life and impacts phone usage.

Barriers to Adopting UBI

Despite UBI’s potential benefits, respondents expressed concerns about black-box policies. Potential roadblocks for U.S. consumers were mostly around pricing and privacy, while Brazilian drivers worried about whether the data might be used to invalidate their claims or whether the devices might cause damage to their cars. Canadian respondents bridged the concerns of Brazil and the U.S. (see Figure 4).

The top-ranking concerns in the U.S. were an increase in premiums (46%), sharing of data (41%), and monitoring and recording of driving habits (40%). Brazilian participants were also concerned their data would be shared with other companies (46%) or used to invalidate claims (47%). To a lesser extent, they worried about damage to their automobiles (40%). Canadian respondents were almost equally concerned with all of the above: insurers invalidating claims (42%), monitoring driving (41%), sharing data with other companies (40%) and increasing premiums (40%).

Spread the Word

Most consumers know very little about UBI, and 26% to 48% of all respondents said they’d never heard of it. Insurers now have an opportunity to convert traditional policy-holders or attract new UBI customers simply by raising awareness of its benefits among millennials, as well as more seasoned drivers. Those who’ve actually used black-box UBI policies have found the experience mostly positive: Brazil (96%), Canada (65%) and the U.S. (62%). So, just as it takes time for any new technology to penetrate the mainstream, it’s fairly safe to say that more consumers will get comfortable with UBI and other evolving technologies that use big data, including driverless cars and the Internet of Things.

What Insurers Can Do

In spite of some differences among respondents in the three countries, there are important commonalities that insurance companies and car manufacturers need to note to meet changing market needs. In general, millennials are more willing to embrace technology and are receptive to UBI, although the degree of openness does vary somewhat by country. More importantly, millennials seem more willing not only to change their behaviour but also to pay for technology equipped with value-added services.

For the most part, respondents were open to most UBI technologies. However, respondents favour ease of use, such as installing a simple device in their car, and technologies that don’t interfere with daily life, such as apps that don’t eat up cellphone data and battery supply.

Insurers have an opportunity to win over consumers who are unaware or unsure about the benefits of UBI. Insurers need to increase awareness, address consumer concerns, and find value that resonates across all age groups, with a particular focus on millennials. UBI adoption will expand as more drivers fully understand the benefits they can accrue: value-added services that go beyond lower premiums and features that highlight road safety, improved driving and ease of mind when their children are on the road.